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AIOU CODE 456 BUSINESS TAXATION SOLVED ASSIGNMENT 2 SPRING 2017 B.COM

Q.3 THE FBR HAS POWERS TO RECOVER THE TAX FROM A PERSON WHO DOES NOT VOLUNTARILY PAYS HIS/HER TAX LIABILITY. UNDER THE INCOME TAX ORDINANCE 2001, WHAT ARE THE DIFFERENT METHODS FOR THE RECOVERY OF TAX FROM SUCH A PERSON? (20)

Answer:-
COLLECTION AND RECOVERY OF TAX:-
Due date for payment of tax:-
Every person who is required to furnish a return of total income under the Ordinance is obliged on the basis of such return to pay tax, (including minimum tax and tax on retailers) on or before the date on which he is required to furnish such return.

Extension in time and payment in installments:-
Upon a written application by a taxpayer in which a good cause is shown the Commissioner can grant to the taxpayer an extension in time for payment of tax due. He can also allow such tax to be paid in installment which may be of equal or varying amounts having regard to the circumstances of each case. Where a taxpayer is permitted such installments and defaults in payment thereof, the whole outstanding tax balance shall become immediately payable. Grant of extension in time or permission to pay tax in installments will not preclude the liability of taxpayer for additional tax arising under section 205.

DIFFERENT MODES OF TAX RECOVERY:-
Initiation, validity etc., of recovery proceedings: Several modes of recovery of tax have been provided in the Income Tax Ordinance and the Commissioner is empowered to initiate any of them for the recovery of tax at any time. It will not be open to a taxpayer to question why a particular mode of recovery has been adopted in his case. This Ordinance provides that: The Commissioner, at any time, as he thinks fit, can. a. amend the certificate issued under section 138A; or b. recall such certificate; or c. issue fresh certificate.
= It will not be open to a taxpayer to question before the District Officer (Revenue) the validity or correctness of any certificate issued under section 138A, or amended/ issued afresh under section 146A(2). = The several modes of recovery are neither mutually exclusive nor affect any other law relating to recovery of debts due to Govt. and the Commissioner can have recourse to any such mode. (1) Recovery of tax out of property and through arrest of taxpayer : The Commissioner can serve upon the taxpayer a notice in the prescr bed form requiring him to pay the said amount within a specified time. If the amount is not paid within that time, or extended time if allowed, he can proceed to recover this amount by one or more of the following modes:
(a) Attachment and sale of any movable or immovable property of the tax payer;
(b) Appointment of a receiver for the management of property of tax payer; and
(c) Arrest of the taxpayer and his detention in prison for a period not exceeding six months. The Central Board of Revenue is empowered to make rules for regulating the procedure for the recovery of tax.

(2) Recovery of tax by District Officer (Revenue) as arrear of land revenue:-
The Commissioner can forward to the District Officer (Revenue) of the district where the tax payer (a) resides; or (b) carries on business; or (c) in which any property belonging to the taxpayer is situated, a certificate specifying the amount of any tax due from him and on its receipt the District Officer (Revenue) will proceed to recover from the tax payer the amount specified in the certificate as if it were an arrear of land revenue.. Powers of Civil Court: To effect recovery of tax, the Commissioner and the District Officer (Revenue) shall have the same powers as a Civil Court has under the Code of Civil Procedure, 1908 for the purposes of the recovery of any amount due under a decree.

(3) Collection of tax in the case of private companies, firms and association of persons:-
Section 139 determines the responsibility of tax payment where it cannot be recovered from a company, or a member of an association of persons. Joint and several responsibility of certain persons:- Where the tax payable by a private company (including a company being wound up or gone into liquidation) cannot be recovered it will be joint and several responsibility of every person who was at time in that year:
(a) A director of the company, other than an employed director; or
(b) A shareholder in the company owning not less than 10 percent of the paid up capital of the company; to pay the tax due. Any director who pays tax is entitled to recover the tax paid from the company or a share of the tax from any other director. Similarly a shareholder who pays tax can recover the tax paid from company or other shareholders proportionately. Where tax payable by a member of AOP cannot be recovered, the association is liable to pay the due by the member. The provisions of this Ordinance shall apply to any amount due under this section as if it were due under an assessment order

(4) Recovery of tax from person holding money on behalf of an assessed:-
For the purpose of recovering any tax due by a taxpayer, the Commissioner may, by notice, in writing, require any person:
(a) owing or who may owe money to the tax payer; or
(b) holding or who may hold money for, or on account of taxpayer;
(c) holding o who may hold money on account of some other person for payment to the taxpayer. or
(d) having authority of some other person to pay money to the taxpayer, to pay to the Commissioner so much of the money and by the date as set out in the notice. All the persons mentioned above are then personally responsible to pay the sum specified in the notice and in case they fail to do so they shall be treated as defaulters and amount specified in the notice shall be recoverable from them by the Tax Recovery Officer or the District Officer (Revenue). Here, the word “person” includes any Court, Tribunal or any other authority

(5) Recovery of tax from Private companies going into liquidation:
Every person referred to here as “liquidator” who is”
(a) a liquidator of a company;
(b) a receiver appointed by a court or appointed out of court;
(c) a trustee for a bankrupt; or
(d) a mortgagee in possession, will within fourteen days of being appointed or taking possession of an asset in Pakistan (whichever occurs first) give written notice thereof to the Commission. A liquidator will not, without the I E ave of the Commissioner, part with any asset held as a liquidator until the liquidator has been notified about the amount of tax payable by the person whose assets are in his hands. A liquidator will be personally liable to the extent of any amount required to be set aside for the tax if, and to the extent that, the liquidator fails to comply with the requirements of law and obligation cast upon him by the Commissioner in writing. The provisions of this Ordinance shall apply to any amount due under this section as if it were due under an assessment order

(6) Recovery of tax due from a non-resident member of an association of persons:
Tax due from a non-resident member of an association of persons in respect of the member’s share of the profits of the association is assessable in the name of the association or of any resident member of the association and may be recovered out of the assets of the association or from the resident member personally. A person making a payment under this section is to be treated as acting under the authority of the non-resident member and is indemnified in respect of the payment against all proceedings, processes. The provisions of this Ordinance shall apply to any amount due under this section as if it were due under an assessment order.

(7) Collection of tax from Non-resident ship owner or charterer : Before the departure of ship owned or chartered by a non-resident person from any port of Pakistan the master of ship has to furnish a return of gross amount specified in section 7(1). When the return is furnished the Commissioner will, after calling for necessary particulars, accounts or documents, determine the tax due and notify the same to the master of the ship for payment. Where Commissioner is satisfied that master of the ship or non-resident owner or charterer of the ship is unable to furnish the return before the departure of the ship, he may allow a 30 days period to furnish the same provided satisfactory arrangements for the payment of tax have been made. No port clearance will be given unless the tax has been paid or that arrangements for its payment have been made to the satisfaction of the Commissioner. The provisions of this Ordinance shall apply to any amount due under this section as if it were due under an assessment order.

(8) Collection of tax from Non-resident aircraft owner or charterer:-
A non-resident owner or charterer of an aircraft liable to tax under section 7, or his authorized agent will furnish a return showing the gross amount within the specified time. When return is furnished, after calling for particulars, accounts or documents required, the Commissioner will determine the tax due and notify the same in writing to the non-resident person. The non-resident person is liable to pay the notify red tax within the time specified in the notice and the provisions of this Ordinance shall apply to any amount due under this section as if it were due under an assessment order. Where the tax due is not paid within three months of service of the notice, the Commissioner may issue a certificate (specifying name of non-resident and the tax due) to the clearance granting authority to refuse clearance from any airport in Pakistan to any aircraft owned or chartered by the non-resident until the tax due has been paid.

(9) Assessment of persons about to leave Pakistan: Persons who are likely to leave Pakistan during the currency of the tax year or shortly thereafter and have no intention of returning back, are required to give a notice to the Commissioner to this effect not less than 15 days before probable date of their departure. The above said notice has to be accompanied by necessary return or returns of taxable income in respect of the period commencing from the end of the latest tax year for which an assessment has been made or not made, and ending on the said date and the said period will be deemed to be a tax year in which the said date falls. The Commissioner can, nevertheless, serve a notice on any person who, in his opinion, is likely to leave Pakistan during the current tax year or shortly after its expiry with no intention to return to Pakistan, to furnish a return or returns of taxable income within the time specified in the notice.

(10) Recovery of tax from person assessed in And Jammu & Kashmir: Where any person assessed to tax in Azad Jammu & Kashmir (ADC) fails to pay tax and the AJ&K income tax authorities cannot recove• because
(a) the person resides in Pakistan; c•
(b) he has no movable or immovable property in AJ&K The Deputy Commissioner in AJ&K may forward a certificate of recovery to the Commissioner and on its receipt the Commissioner shall recover the tax in accordance with this Part of the Ordinance. This certificate of recovery shall be in the prescribed form and shall specify:
i. person’s place of residence in Pakistan;
ii. the description and location of his movable or immovable property situated in Pakistan; and
iii. the amount of tax payable by the person.

Q.4 THE SALES TAX IS APPLIED ON THE RETAIL PRICE OF DIFFERENT GOODS AND SERVICES AND IS GENERALLY WRITTEN ON THE PACK OF THE PARTICULAR PRODUCT. IN THIS REGARD, HOW WOULD YOU DEFINE THE FOLLOWING TERMS WITH REFERENCE TO THE SALES TAX ACT 1990: (20)

A) RETAIL PRICE
Answer: “Retail price”, with reference to the Third Schedule, means the price fixed by the manufacturer (“or the importer” omitted by Finance Act 2005) inclusive of all duties, charges and taxes (other than sales tax) at which any particular brand or variety of any article should be sold to the general body of consumers or, if more than one such price is so fixed for the same brand or variety, the highest of such price,

b) Taxable Supply
Answer: “Taxable supply” means a supply of taxable goods made by an importer; manufacturer, wholesaler (including dealer), distributor or retailer other than a supply of goods which is exempt under section 13 and includes a supply of goods chargeable to tax at the rate of zero per cent under section 4;

c) Zero Rated Supply
Answer: “Zero – rated supply” mears a taxable supply which is charged to tax at the rate of zero per cent under section 4.

e) Input Tax
Answer: “Input tax”, in relation to a registered person, means the tax -(
a) levied under this Act on the supply of goods received by that person;
(b) levied under this Act on goods imported, entered and cleared under section 79 or section 104 of the Customs A that person;
(c) levied under the Sales Tax Act, 1990 of Pakistan as adapted in the State of Azad Jammu and Kashmir, on the sup goods received by that person; and
(d) chargeable as duties of excise under section 3 of the Federal Excise Act, 2005, on such excisable goods as are mentioned in the Second Schedule thereto or such excisable services as the Federal Government may from time to t notify under section 7 thereof and on which such duties are charged, levied and paid as if it were a tax payable under section 3 of this Act Clause (d) substituted by Finance Bill 2006 which previously read as follows : (d) chargeable as duties of excise under section 3 of the Central Excises Act, 1944 (I of 1944). on such excisable goods or services as are notified by the Federal Government under the third proviso to sub-section (1) thereof and o which such duties are charged, levied and paid as if it were a tax payable under section 3 of this Act; (e) levied under the Punjab Sales Tax Ordinance, 2000 (Pb. Ord II of 2000), North West Frontier Province Sales Tax Ordinance. 2000 (III of 2000), Sindh Sales Tax Ordinance, 2000 (VIII of 2000), Baluchistan Sales Tax Ordinance, 2000 ( 2000) and Islamabad Capital Territory (Tax on Services) Ordinance, 2000 DWI of 2000)

f) Output Tax
Answer: “Output tax” in relation to any registered person means the tax charged under this Act in respect of a supply of goods made by that person and shall include duties of excise chargeable under section 3 of the Central Excises Act, 1944 (I of 1944) on such excisable goods or services as are notified by the Federal Government under the third proviso to sub-section (1) thereof and on which such duties are charged, levied and paid as if it were a tax payable under section 3 of this Act;

h) Due Date
Answer: “Due date”, in relation tc the furnishing of a return under section 26 (“, sub-section (6) of section 26A” omitted by Finance Bill 2004) and section 26AA means the 15th day of the month following the end of the tax period, or such other date as the Federal Government may, by notification in the official Gazette. specify;